SIP or recurring deposit when you do not want equity risk?
Fear of equity is a reason to keep a dated goal in a recurring deposit, not a reason to type 12% into a SIP and hope. The RD calculator pays the rate you type, compounded the way this site models bank RDs. The SIP calculator pays a return that is only an assumption.
Last updated: · 4 min read
₹5,000 a month for five years
Bar chart of a five-year ₹5,000 RD at 7% against SIPs at an assumed 8% and 12%.
- RD at 7%₹3.60 lakh
- SIP at 8%₹3.70 lakh
- SIP at 12%₹4.12 lakh
The two calculators are not promising the same thing
The RD calculator compounds each monthly deposit the way this page models an Indian bank RD: quarterly. At 7% for 60 months, ₹5,000 matures near ₹3,59,664. Interest is about ₹59,664. If your bank’s rate is not 7%, type the rate from the deposit card. This article does not look up a live rate.
The SIP calculator at 8% on the same ₹5,000 for five years ends near ₹3,69,834. At 12% it ends near ₹4,12,432. Those are constant-return drawings. A real equity SIP can be below the ₹3,00,000 you paid in. The RD, if held to maturity at the contracted rate, is not that kind of product.
Five years is a short time to be paid for equity fear
The gap between the 7% RD and the 8% SIP is about ₹10,000 on these inputs, before tax, and the SIP might not get there. The gap to the 12% SIP is larger, about ₹52,768 before tax, and it is the gap people use to talk themselves into equity they will sell in the first fall.
For a fee, a trip, or a down-payment slice you will need on a date, the RD’s smaller number is the one you can plan against. Equity for that date means you might sell after a fall. Fear is information. Put the dated rupees in the deposit.
A long goal is a different split
Money you will not need for fifteen years is where a SIP at a dull assumed rate earns its discomfort. You do not have to put the whole surplus there. A common honest split is the RD for the dated bill and a SIP small enough that a fall does not force a sale.
Do not “fix” the fear by typing 6% into the SIP calculator and calling it a debt fund. A debt fund is not an RD. This comparison is only the RD formula against the SIP formula.
- Dated and unwilling to watch a fall: RD at the rate on the card.
- Long horizon and able to leave it: SIP at a rate you can defend.
- Both results here are before tax.
Tax does not make them equal
RD interest is income. The maturity on the RD page is before tax. A SIP redemption can be a capital gain, which the SIP page also does not compute. Comparing ₹3,59,664 with ₹4,12,432 as if both were spendable overstates the SIP and can overstate the RD.
Keep the comparison as a risk comparison first. The RD’s extra comfort is that the rate is agreed. The SIP’s extra rupees exist only inside the assumption.
Worked example: ₹5,000 for five years
RD at a 7% rate you would type. SIP at two assumed returns. Deposits are ₹3,00,000 in every column. Before tax.
| Item | Figure |
|---|---|
| Monthly amount | ₹5,000 |
| Months | 60 |
| Deposited | ₹3,00,000 |
| RD at 7% | about ₹3,59,664 |
| SIP at an assumed 8% | about ₹3,69,834 |
| SIP at an assumed 12% | about ₹4,12,432 |
Use the RD number for a date you cannot miss. Use a SIP only for the slice you can watch fall. The ₹4.12 lakh is not the prize for being nervous.
Sources
Results from FinanceChacha are estimates for planning, not financial or tax advice. Read the disclaimer.
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